Final FY18 Budget Actions – No Surprises

The General Assembly passed the capital and operating budgets early this session – and the Governor opted not to veto anything before sine die, making the General Assembly Conference Committee’s version final. The budget plan consists of the following bills:

The Joint Chairmen’s Report (JCR), the annual report which lists each action adopted by the General Assembly in the budget, along with explanations, committee narrative, and requests for reports on more information, became available on April 10.

Operating Budget

The General Assembly reduced the Governor’s initial proposed budget of $43.5 billion by a total of $296.7 million, including $165.2 million through amendments to the BRFA. From the Conference Committee Report:

Although the total growth in State spending, excluding reserve fund appropriations, is only 1.5%, the budget expands funding for core State services and priorities including public education, higher education, Medicaid, and human services, restores funding for legislative priorities, while at the same time more than meeting the guidelines established by the Spending Affordability Committee (SAC) in 2016.

The projected general fund balance at the close of fiscal 2018 is $100.2 million, and the Rainy Day Fund balance is $860.3 million – leaving almost $1 billion in cash reserves, in part to help protect against uncertainty based on actions by the federal government. The budget reduces the structural deficit from nearly $400.0 million to $38.0 million. While overall spending increases by 1.5 percent, general fund spending only increases by 0.5 percent.

Education: State support for public schools is almost $6.4 billion. Direct State support for local school systems increases by an estimated $96.4 million, or 1.7 percent. The budget fully funds the Thornton formulas and provides $28.2 million of new funding for grants to school systems experiencing declining enrollment and/or providing full-day pre-kindergarten to their four-year-olds.

State support for Maryland’s public four-year colleges and universities grows by $32.7 million allowing undergraduate tuition rates to increase by a modest 2.0%. Community colleges limiting tuition growth to 2.0% will share $4.0 million in incentive payments.

Transportation: Counties receive an additional $8.8 million in local transportation aid under the passed budget. The General Assembly reduced the Governor’s proposal from $27.4 million to $12.8 million in transportation grants to 23 counties. This includes $4 million of capital grants which counties have received since fiscal 2016. Baltimore City’s share was increased to $5.5 million, and municipalities’ share was increased to $20.1 million. The county-by-county breakdown is available here.

In addition, in response to concerns expressed by the Department of Legislative Services (DLS) regarding the Maryland Department of Transportation (MDOT)’s programming of local transportation aid, the General Assembly adopted language prohibiting MDOT from programming capital transportation grants to local governments in the Consolidated Transportation Program (CTP) beyond the budget request year. The new language is intended to address concerns expressed by DLS that the Governor’s “capital grants” are titled incorrectly and programmed inappropriately in out years. The language is available here.

Disparity Grant: While the Governor’s budget funded disparity grants at fiscal 2017 levels, the General Assembly rejected that flat funding provision, but also reduced the minimum grant amount from 67.5% to 63.75% of the disparity grant calculation provided in fiscal 2018 only. This reduces the total disparity grant amounts under the statutory formula for fiscal 2018 by $2.4 million. Additionally, the General Assembly restricted funding for disparity grants for jurisdictions receiving an increase until the Maryland State Department of Education certifies that each jurisdiction has increased local spending on public schools above the Maintenance of Effort (MOE). They specified, however, that increased allocations to public schools under this language will not increase MOE requirements in fiscal 2019.The report language is available here.

State Department of Assessments and Taxation (SDAT) Cost Shift: The General Assembly rejected the Governor’s proposal to make counties responsible for nearly all operating costs for the assessment and directorial functions of SDAT – 70 percent in fiscal 2018, and 90 percent for every year thereafter, a hit of about $20 million in out years.

Local Health Departments: The General Assembly adopted the Governor’s proposal to essentially flat fund local health department aid at $51 million. They did not adopt a DLS recommendation to shift $1.6 million in contractual employee health insurance costs onto local governments.

County-by-county breakdowns of health department and all local government aid are available here; however, use caution: these FY 2018 numbers represent the Governor’s proposed amounts and not the General Assembly-approved amounts. Therefore, local transportation aid numbers will be higher here than actual approved amounts, and disparity grants and potentially some education aid amounts may be lower.

Capital Budget

The General Assembly passed authorization of $1.089 billion in new State debt – $76 million more than the Governor’s original proposal of $1.013 billion.

School Construction: The General Assembly approved $285 million for public school construction, but added a provision which eliminates the role of the Board of Public Works (BPW) in reviewing the statewide spending plan of the Interagency Committee on School Construction (IAC) – giving the IAC final approval of the plan. Lawmakers added $5 million to the authorization, and restricted it for Baltimore County to replace $5 million withheld by the BPW in fiscal 2017. They also restricted $5 million in contingency funds for air conditioning projects in Baltimore City Public Schools. Language is available in the JCR here.